Notes From the Doctrine

Shrinkwrap, Clickwrap, Browsewrap

Shrinkwrap:
Hill v. Gateway and Klocek v. Gateway
Hill v. Gateway:
Buyer bought computer with “terms and conditions” that compelled
arbitration. If buyer did not return computer within 30 days, they have
accepted terms and thus agreed to go to arbitration

P’s argument: contract formed at time they ordered, so under §2-207,

arbitration provision is mere proposal that does not bind them

Held: this is acceptance by performance; §2-207 does not apply

because there is only one form

This application of §2-207 is patently wrong (see comment 1 of

§2-207), as it doesn’t apply only to multiple forms

Expansion of silence as acceptance rule – “no contract until receipt”

interpretation

Klocek v. Gateway:
Same facts as Hill

Held: §2-207 applies to single form case

“Contract at time of order” interpretation – purchaser is offeror, vendor

is offeree
Gateway accepted by agreeing to ship/shipping, so additional terms
not part of agreement unless P expressly agreed to them

Right to withdraw: ProCD and Hill did something valuable for

consumers: gave them right to withdraw

Clickwrap: clicking “I agree” is robust assent, because there is duty

to read

Browsewrap and Specht v. Netscape

Buyer downloaded two software programs, C and D

To download C, buyer must use “clickwrap” procedure: license terms

shown and downloaders must click “I agree” – robust assent with “duty
to read”
To download D, buyer just had to click “Download”, and terms
mentioned well below the link and took buyer to another website

Held: buyer not held on actual or inquiry notice, so arbitration provision

in terms not binding
Implied Contracts
When parties do not explicitly manifest intent to contract, intent may
be gathered by implication from their conduct, language, other
circumstances

Reasons for Lack of Expression:

Based on benefit

Based on presumption party intended to pay

Day v. Caton: D bound to pay share for cost of construction of wall,

since reasonable party would know about expectation to pay and can
reject
Taco Bell: P may support claim of implied in fact contract by showing
he disclosed idea to D at D’s request and that D understood P
expected compensation problem with negotiating over new ideas is
you need commitment before you see idea – non-disclosure
agreements come with cost

Based on high transaction costs

a. Taco Bell: problem with negotiating over new ideas –
hard to write contract without exposing the idea, and
need commitment before you see the idea
In the Employment Context:
At-will vs. Covenant of good faith

At-will: default rule. Employment having no specified term may be

terminated at will of either party on notice --- no good cause necessary

Implied covenant of good faith: no discharge without good cause

Hillesland: no implied covenant of good faith in at-will contract for

employment; three reasons: up to legislature, amorphous concept, and
if P wants job security, he should bargain for it

Indefiniteness and Gap Filling

Generally two contexts: exclusive dealing agreements and

outputs/requirements contracts
Exclusive dealing – parties prefer flexible rather than fixed obligation.
Distributor wishes to avoid being tied to specific sales quota, because
demand for product is difficult to estimate. Manufacturer then can
count on distributor to use best efforts

Flexible quantity: K obligations deemed satisfied if quantity

tendered/demanded falls within expectable range

Falstaff: Beer company sold assets to Falstaff for $4 mil plus royalty of
50 cents/barrel. Falstaff to use “best efforts”, but new management
came in and slashed advertising and beer sales shrank

Held: cannot justify failure to use best efforts to maintain high sales
merely by asserting it could make money operating a different way.
Cannot sacrifice best effort in interest of your own profit

Gap filling – Majoritarian rule. Mimics what we think the parties would
have done had the expressly said so. Gives parties something that
resembles hypothetical agreement. Easy to opt out of by writing
provisions

Enables parties to commit to relationship and not price

Pre-contractual Liability

Reliance and Red Owl: Fair-dealing requirements can be imposed to

parties engaged in pre-contractual negotiation. If P relies on pre-
conditions to establish a contract, he can recover under §90 for
justifiable reliance
 2-207 Additional Terms:
Expression of acceptance/written confirmation sent within reasonable time is
acceptance even though it states additional/different terms from those offered or
agreed upon, unless acceptance expressly made conditional on assent to additional of
different terms. Between merchants such terms part of contract unless:
---The offer expressly limits acceptance to its terms; terms materially alter offer; or
notification of objection has already been given or is given within reasonable time
after notice

Conduct by both parties that recognizes K existence sufficient to establish K for sale
although writings do not otherwise so establish. Terms are those that parties agree
2-204: K for sale does not fail for indefiniteness if parties intended to make K + reasona

2-306 Output, Requirements,

Knockout rule: conflicting clauses
knock out  Gap filler. If both
parties have “mine and mine only”:
knock out  realism of contract
>formal text 
context > formality
Exclusivity
Term which measures seller’s output
or buyer’s requirements means actual
output or requirements in good faith.
No quantity disproportionate to either
estimate may be tendered or
demanded
Exclusive dealing = obligation by

2-305 Price: 2-308 Place:

Can conclude K for sale
even if price not settled.
Price = reasonable at time
for delivery if:
--Parties say nothing;
parties agree to fix it and
it doesn’t get fixed;
parties agree that it will
be fixed in terms of
agreed standard and it’s
not
Price to be fixed in good
faith
When price left to be fixed
other than by agreement
fails through fault of one
party, other may cancel or
fix it himself
Unless otherwise 2-309 Time:
agreed… Time for shipment or delivery/other
action, if not provided for in this
Place for delivery is article or agreed upon, shall be
seller’s place of reasonable time
business or
residence, but… Where K provides for successive
performances but is indefinite in
In K for sale of duration, it is valid for reasonable
identified goods time. But unless otherwise agreed,
which are in some may be terminated at any time by
other place, that either party
place is place for
their delivery, and Termination of contract (except
when parties agree an event will
Documents of title terminate it) requires reasonable
may be delivered notification. Agreement dispensing
through customary with notification invalid if it would
banking channels be unconscionable

Where parties intend not 2-201: K for $500 or more not enforceable unless some
to be bound unless price is writing sufficient to indicate that K for sale has been made
fixed and it’s not, no and is signed by party against whom enforcement sought.
Writing not insufficient if it omits term, but not enforceable